The recruitment industry, which has been engaged in extended consultation with Department of Trade and Industry (DTI) Minister Alan Johnson and his department officials over new proposed legislation, has presented new evidence from MORI which shows that the latest draft regulations for the industry will threaten recruitment businesses commercial interests.

The Recruitment and Employment Confederation (REC) – representing over 6,000 recruitment businesses and 7,500 individuals working at all levels within the industry – commissioned the research from MORI in response to the Government’s proposals concerning ‘temp to perm fees’. This enables an agency to recoup costs of finding, attracting, training and administration of temporary staff, if a hirer decides to offer the temp permanent employment, thus removing him or her from the agency’s books.

The DTI has proposed that a fee may not be charged if the temp terminates the assignment with the hirer but returns as a permanent employee only 4 weeks later. The industry argues that this provides a cheap alternative to permanent recruitment, where many employers already have to wait at least 4 weeks, whilst a new employee works out notice with their previous employer. It also places a greater financial strain on smaller recruitment businesses, which are less able to absorb loss of revenue from these fees. Finding temporary staff and preparing them for assignment is expensive and time consuming and many small firms have said that the move could put them out of business.

The industry has 1.1 million temporary workers on its payroll in any given week, a large number of whom each year find permanent placement as a result of temporary assignment – this is a major issue for this £18.2 billion turnover sector. The REC’s evidence centres on research conducted by MORI across a sample of 281 UK businesses. The research aimed to determine to what extent agencies are used to recruit permanent and temporary staff, knowledge of proposed changes to legislation governing the client/agency relationship, and the likely impact of proposed changes on recruitment methods.

The key findings are as follows:

• 94% of businesses use, or have used, a recruitment agency to meet staffing demand.
  

  Use of agencies across every commercial sector is widespread, with many organisations using agencies as a central element of their recruitment process. Demand for secretarial, clerical and professional temporary workers is highest among large (250+) companies, although small and medium sized enterprises are also heavy users of recruitment agencies.

  Employers are becoming increasingly dependent on the ready availability of appropriately experienced and skilled temporary staff.

  
  

• The majority of companies using temporary workers have, at some point, taken on a temporary worker on a permanent basis.
  

  Within the secretarial and clerical sectors, 64% of companies questioned had employed permanent staff via the ‘temp-to-perm’ route – rising to 72% in the professional sector.

  
  

• 81% of employers have never heard of the DTI’s proposed changes.
  

  In a market where over 74% of employers have paid a ‘temp-to-perm’ fee, overwhelming majorities are unaware of any legislative changes to the client/agency relationship.

  
  

• If the DTI proceeds with its proposal to limit a temp-to-perm fee to four weeks after the end of an assignment, 54% of those businesses questioned would use the new legislation as a route for permanent recruitment, which would avoid paying fees to recruitment agencies.
  

  This percentage falls as the time limit increases – with a period of 8 weeks, only 23% of employers would use the legislation to circumvent recruitment fees, and at 13 weeks the period proposed by the REC, the figure falls to 11%.

It is noteworthy that even though few of those questioned had prior knowledge of the intended legislation, the opportunity to avoid these legitimate charges was immediately apparent. When and if the legislation is introduced and becomes widely understood, a much higher proportion of employers can be expected to take advantage of it.

The research was presented to DTI Ministers a few weeks ago, and both Secretary of State Stephen Byers and Minister for Competitiveness Alan Johnson have given assurances that it will be given every consideration.

Tim Nicholson, Chief Executive of the REC, has welcomed these assurances and hopes that this new evidence will be seen to have got the attention it deserves when the next draft of the legislation is released. “The research conducted by MORI is conclusive in several key areas. Firstly, that the majority of UK businesses use recruitment agencies as an essential part of their human resource planning and sourcing. Recruiters are vital to the continuity of commercial success for many organisations – and provide a service to many smaller businesses that do not have the capacity for a dedicated HR function.”

“Secondly, many of these employers use recruitment agencies as a route for sourcing permanent staff and have accepted the fairness of paying a fee for such services. This has dual benefits in enabling employers to ‘try before they buy’ and allows job seekers access to permanent roles.”

“Finally, and perhaps most importantly, when made aware of the impact of this legislation, the majority of employers said that if a 4 week limit was placed on the charging of a temp-to-perm fee, they would be likely to use recruitment agencies as a free and convenient way to source staff.”

“This makes a nonsense of any suggestion that employers will not wait 4 weeks for a potential employee, but will prefer the alternatives of paying the fee or extending the hire period. People in business have a duty to use every legitimate way to reduce costs,” continues Nicholson.

“The results of the MORI research confirm, in clear commercial terms, the detrimental impact that the Government’s proposals will have on the recruitment industry. The industry provides an essential and highly valued service to employers and job seekers. There is no pressure from anywhere for a quarantine period of this nature, and if it is introduced it will hit the industry, especially small firms, hard, and reduce their ability to take on and invest in their temporary staff.”

“We have represented that this proposal, which will affect different recruitment sectors in different ways, is disproportionate, and is a blanket ‘one size fits all’ approach, at a time when everyone is calling for careful targeting of regulation in an environment of increasingly burdensome red tape.

“The Government will surely recognise the force of this new evidence when it presents the next draft of its new regulation to the industry shortly,” concludes Nicholson.